Turning your current home into an investment property ready for rent can be a lucrative venture. There is plenty to consider before and during the transition process, so it is important to have a clear understanding of what is needed in the early stages to ensure positive long-term investment health.
If you have lived in the property for some time, it can be challenging to separate the emotional attachment to the home itself. While difficult, it is important to set aside sentiment and treat the property as a business. Taking the time to plan the long-term strategy of the property will help ensure clear goals
are met.
Some consideration when it comes to turning your home into a rental property:
- Firstly, engage the services of a real estate office that has professionals in both sales and property management. Markets fluctuate, so it is likely that you will need a professional to inspect your property and give an accurate indication of its current worth. Do your due diligence and research the local market. Having your property valued will be beneficial for tax purposes and assist when it comes to setting the right rental rate.
- An extremely important aspect of the transition is understanding the tax implications of transitioning from primary residence to investment property. Rent is considered income, therefore will be taxed accordingly. Of course, the benefits of owning an investment property are the associated tax deductions, such as land tax, building depreciation, appliance depreciation, repairs, and maintenance. It’s important to have a clear understanding that if the property has been used personally prior to renting, how much of the former you can claim may be impacted. You are only able to claim from when the property became an investment. Ensure you seek out expert advice on such important matters.
- Does the property meet compliance requirements? Consider what the property may need in order to have it ‘rent-ready’. It’s worth noting that if renovating, or completing repairs/upgrades, you consider when these are completed, as the property will likely be vacant during that time.
- Do you need to review the mortgage you currently hold on the property? How does your interest rate fair? Is there a more suitable mortgage arrangement for this change of circumstance? Meet with a finance broker to discuss.
- Property insurance differs from principal residence to investment and making sure you have the right type of insurance on the property is vital in the event you need to access it. Research and select the most appropriate landlord insurance for your specific needs.
- Marketing and management of the property will play an important role in the success of the property as an investment. Finding the right tenants and ensuring the right care is taken is important so having the right property management team to take the stress of management away from you will help make the transition easier.
No doubt the decision to turn the family home into a part of your investment strategy plan was not taken lightly, therefore ensuring you have the right advice legally, strategically, and professionally will undoubtedly put you in a promising position as landlord. Engage with your accountant, financial planner, broker/bank, and your property manager to ensure the most success in your long-term strategy.